December 06, 2001 11:00 pm

By Alice Perry Linker

Observer Staff Writer

An auditing firm has found no irregularities in the administrative or overhead costs of the private corporation that provides public and mental health services for Union County.

The Oster Professional Group of John Day reviewed the overhead cost allocation procedures for the Center for Human Development at the request of the Union County commissioners.

In a letter dated Nov. 30 and addressed to the commissioners, Oster certified public accountant Robert M. Armstrong wrote, Nothing came to our attention that caused us to believe that the overhead cost allocation policies and formulas for the Center for Human Development were inadequate and lacked reasonableness and credibility.

The auditors reviewed only overhead costs, did not perform an audit, and did not express an opinion on the cost allocations.

Armstrong wrote, We were not engaged to perform an audit, the objective of which would be the expression of an opinion on the overhead cost allocations. Accordingly, we do not express such an opinion.

The auditors did find that CHD did not separate some management and general expenses from program expenses, and the review states that the corporation lacks a purchase order system, as well as having some deficiencies in reporting accounts receivable. The review did not elaborate on the deficiencies.

The review also states that there is a missing ingredient, separating specific program costs from support services.

Union County Commissioner Steve McClure, who requested the review, said Wednesday that he and CHD Executive Director David Still have been aware of some accounting issues.

Part of the problem is separating overhead costs from program management, McClure said. If its a program cost, you should put it into that program, and Ive said that for a number of years.

That is a problem. They are aware of it.

CHD has hired a consultant, Sharon Gibson-Alexander, who has also recommended that program costs be separated from overhead costs.

Armstrong raised two questions about calculating administrative expenses: Is the cost truly administrative or can it be associated with a program? Are the formulas applied to the overhead allocation still valid?

The auditor suggested that the CHD create a general fund.

This will allow CHD to have a better handle on their unrestricted assets and deliberately allocate general fund assets to programs that show a loss, Armstrong wrote.

The financial review of CHD is one of two ordered by the county commissioners. A performance review by Marion County Health Department Director Jeffrey Davis was concluded in September.

The countys health and human services advisory committee will meet with Davis in January to discuss his analysis. The financial review is expected to be discussed at the same time.